Hutton v. Gliksberg

• Decision Date: 27 January 1982
• Citation: 128 Cal.App.3d 240,180 Cal.Rptr. 141
• Court: California Court of Appeals Court of Appeals
• Parties: Brian G. HUTTON, et al., Plaintiffs and Respondents, v. Mike GLIKSBERG and Sheina Gliksberg, Defendants and Appellants. Civ. 60041.

Page 141

180 Cal.Rptr. 141

128 Cal.App.3d 240

Brian G. HUTTON, et al., Plaintiffs and Respondents, v. Mike GLIKSBERG and Sheina Gliksberg, Defendants and Appellants.

Civ. 60041.

Court of Appeal, Second District, Division 5, California.

Jan. 27, 1982.

Hearing Denied April 15, 1982.

Miller, Starr & Regalia, Harry D. Miller, Karl E. Geier, Oakland, and Alvin Wechsler, Beverly Hills, for defendants and appellants.

Gang, Tyre & Brown, Inc., and Howard King, Los Angeles, for plaintiffs and respondents.

ASHBY, Associate Justice.

Plaintiffs Brian G. Hutton and Albert S. Ruddy (hereinafter Buyers) brought this action against defendants Mike and Sheina Gliksberg (hereinafter Sellers) to compel specific performance of a contract for the purchase and sale of real property. The trial court granted a judgment in favor of Buyers, compelling Sellers to convey the property and awarding incidental compensation. Sellers appeal. ¹

On March 3, 1977, the parties executed a written contract for the purchase and sale of an apartment building at 426-428 Spaulding Drive in Beverly Hills, California, for $750,000. They executed escrow instructions dated March 7 which called for escrow to close on or before April 21, 1977, time being of the essence. As of April 21, Buyers had performed their obligations but Sellers had not provided escrow with the necessary documents. On April 22, Sellers, in writing, canceled the escrow. This action followed.

Sellers contend (1) that the contract's terms were not sufficiently certain to be specifically enforced; (2) that Buyers did not adequately tender the purchase price; and (3) that the trial court erred in its award of incidental compensation.

CERTAINTY OF CONTRACT TERMS

The purchase price of $750,000 was payable as follows: (1) $250,000 cash to be deposited in escrow; (2) Buyers to obtain a new first trust deed loan of $400,000; and (3) Sellers to provide a second trust deed loan of $100,000. The contract and escrow instructions also provided that Sellers were to receive a net figure of no less than $700,000 "regardless of adjustments such as prepayments mortgage penalties, real estate commissions, etc." Sellers contend that the net price provision and the terms of the loans were too uncertain to permit specific enforcement. (Civ.Code, § 3390, subd. 5.) This argument is without merit.

Paragraph 4 of the escrow instructions provides: "Nothing to the contrary herein The escrow officer, Elaine Berk, testified to the various debits and prorations which would have been charged to the Sellers in escrow had the transaction not been canceled. Without the agreement of the broker, Sellers would have netted $697,906. Thus under the agreement the broker would have been required to reduce his commission by approximately $2,100.

                withstanding [Seller] is to receive a net figure of no less than $700,000.00 regardless of adjustments such as prepayments mortgage penalties, real estate commissions, etc.  Escrow holder will be further instructed by Seller."   The realtor, Todd Compton, explained the meaning of "adjustments" and "etc."   Sellers wanted to be assured that after all charges against Sellers in escrow, Sellers would net $700,000 exclusive of encumbrances.  To facilitate the transaction, Compton agreed with Sellers 2 that if the charges against Sellers in escrow, including Compton's $45,000 commission, exceeded $50,000, then Compton would reduce his commission by whatever amount necessary to enable Sellers to net $700,000 exclusive of encumbrances. 3
                

Sellers contend the contract and escrow instructions did not adequately specify what elements were to be subtracted in determining the net figure. We disagree. In King v. Stanley, 32 Cal.2d 584, 197 P.2d 321, a specific performance case in which there was also a provision that the seller was to "net" a certain amount (id. at p. 587, 197 P.2d 321), the court stated, "There is no merit in the contention that the court could not ascertain with reasonable certainty from the writings of the parties the duty of each and the conditions of performance. Equity does not require that all the terms and conditions of the proposed agreement be set forth in the contract. The usual and reasonable conditions of such a contract are, in the contemplation of the parties, a part of their agreement. In the absence of express conditions, custom determines incidental matters relating to the opening of an escrow, furnishing deeds, title insurance policies, prorating of taxes, and the like." (Id., at pp. 588-589, 197 P.2d 321; citations omitted.) Here the "adjustments" were the routine debits and charges made by the escrow officer, and the provision in question was not fatally lacking in certainty.

Sellers next argue that the contract is not specific enough as to the terms of the financing. The contract and escrow instructions provided that Buyer would procure a new first trust deed loan in the maximum amount of $400,000 "at current rates and charges" and that Buyers would execute a second trust deed securing a note for $100,000 in favor of Sellers, "due and payable in five (5) years, bearing interest at 1/4% more than the interest for the first trust deed," principal and interest to be amortized for a period of 30 years, payable monthly beginning 30 days after close of escrow. ⁴

Sellers contend that, because Sellers were to carry a second trust deed loan, it was necessary that the terms of the first trust deed loan be spelled out with greater specificity in order to protect Sellers' security. Sellers misplace reliance upon a long line of cases involving subordination agreements in real estate development projects. ⁵ In those The situation in the instant case is entirely different. Sellers did not subordinate their trust deed to a future construction loan far larger than the value of the property. They simply agreed that their trust deed securing a loan of $100,000 would be second to a first trust deed purchase money loan in the amount of $400,000. Sellers were to receive $250,000 cash, the property being worth $750,000, which was more than adequate security for both loans. Unlike the cases cited by Sellers, there were no circumstances calling for extremely strict requirements of specificity as to the terms of the first trust deed loan. (See Connell v. Zaid, 268 Cal.App.2d 788, 791-792, 74 Cal.Rptr. 371 [distinguishing the true subordination agreement cases].)

cases a [128 Cal.App.3d 246] seller would sell land to a developer, the seller taking back a trust deed which the seller agreed would be subordinate to a construction loan to be made by another lender to build improvements on the property. In such circumstances the seller would be in a very precarious position. If, after obtaining the construction loan, the developer failed to build the improvements as planned, or the project was simply unsuccessful and there was a default on the construction loan, the property was likely to be inadequate security for both the construction loan and the subordinate lien of the original seller. The courts were therefore generally unwilling to order specific performance of executory contracts containing a subordination agreement, unless the terms of the construction loan and protections for the seller were spelled out in detail.

Sellers also suggest that the terms of the second trust deed loan were vague. However, the amount, the period, the amortization rate, and even certain other details were spelled out. The interest rate was to be " 1/4% more than the interest for the first trust deed." The interest rate was tied to an external standard, and thus was not fatally uncertain. (See Burrow v. Timmsen, supra, 223 Cal.App.2d 283, 289-290, 35 Cal.Rptr. 668.)

BUYERS' PERFORMANCE

Sellers contend they are excused from performance on the ground that Buyers did not adequately tender the purchase price. This argument is wholly without merit.

The first trust deed lender, Santa Fe Federal Savings, sent a letter to escrow April 4, 1977, stating that Buyers' $400,000 loan was approved. Santa Fe Federal's loan agent, Donald Krasne, testified that Santa Fe Federal issued a loan commitment to the escrow; Santa Fe Federal was prepared to disburse to escrow, or to those to whom the funds were to be routed in accordance with the procedure outlined by the escrow officer, $400,000 upon a request from escrow that it do so; Krasne had "enclosed [sic] his file" and instructed the home office to disburse the proceeds upon request; and Santa Fe Federal was prepared to loan the $400,000 in question and had waived any requirement that an insurance endorsement be issued and deposited in escrow prior to April 21.

Elaine Berk testified that in her experience as an escrow officer, an institutional lender never actually deposits cash funds with the escrow. Instead, upon request by the escrow officer prior to closing, the lender, after deducting its charges, pays the proceeds to the title insurance company, who pays off existing liens and then forwards the remainder of the proceeds to the escrow.

Sellers contend that nevertheless Buyers were in default because they did not deposit

$400,000 cash, in addition to their other cash deposits, in escrow. In light of the above evidence, this argument is absurd. The trial court found that Santa Fe Federal was prepared to deliver loan funds to escrow immediately upon request, that Santa Fe's loan commitment constituted the equivalent of cash for purposes of measuring performance by Buyers, and that Buyers performed in a timely manner all acts required on their part. This finding is amply supported by the evidence. (Thein v. Sticha, 93 Cal.App.2d 295, 297, 300, 209 P.2d 13.)

INCIDENTAL COMPENSATION

In addition to ordering Sellers to convey the property, the trial court made a monetary award to buyers, totaling $122,219, to compensate Buyers for the fact that at the time specified for performance in the contract, Buyers had a loan commitment for $400,000 at 9 1...